A 1000 - par value 25-year bond with 4% semiannual coupons is callable on any coupondate in the 12th to the 25th year. In the 12th to 17th year, the bond is callable at aredemption value of 1500. In the 18th to 25th year, the bond is callable at a redemptionvalue of 1200. (a) Calculate the maximum purchase price for this bond that will guaranteean annual nominal yield rate of at least 3% convertible semiannually. (b) Find the annualnominal yield rate compounded semiannually if the bond is called on the "best" date.

1. Calculating Maximum Purchase Price:. We have a bond with a face value (FV) of $1000, a coupon…

Answered: A 1000 - par value 25-year bond with 4%…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 4P

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